Much of extra income for state already spent

Updated 12:24 am, Sunday, December 23, 2012

AUSTIN — Texas' recovering economy is expected to pour billions more into state coffers, but much of the money will be gobbled up by a Medicaid IOU and other demands before lawmakers can begin to address long-neglected infrastructure needs or think about restoring education funding.

Some GOP leaders are talking about raising motor vehicle registration fees in the next budget cycle to address traffic congestion, or using $1 billion from the state's rainy day fund to seed an infrastructure bank that would provide for Texas' water needs.

“We'll be in a lot better shape than we were, but we're not going to be flush with money,” said Senate Finance Committee Chairman Tommy Williams, R-The Woodlands. “I keep hearing from a lot of people about a surplus. And I'm going to tell you, I've looked in every nook and cranny and in every file cabinet in the Senate Finance Committee office, and I don't see a surplus anywhere.”

Lawmakers will convene Jan. 8 to find the fiscal picture much brighter than the one they left in 2011.

Faced with a shortfall fed by a recession and past budget decisions, lawmakers in 2011 carved some $14 billion from the budget, allocating $173.5 billion in state and federal funds combined for the current two-year budget period.

State Comptroller Susan Combs set the spending parameters with her revenue forecast, but state tax money is coming in at much higher rate than she projected.

Some lawmakers and budget experts expect to have as much as $8 billion to $9 billion more in general revenue to spend in this fiscal period, which ends Aug. 31. Some are guessing lower. Combs will give her new revenue estimate on the eve of the legislative session.

The unanticipated tax revenue is on top of some $8.1 billion projected to be in the rainy day fund at the end of this fiscal cycle, plus any revenue growth in the next two-year budget cycle.

“I don't like to get too far ahead on the next biennium's budget because the two sessions that I served as speaker, both times on the opening day there's been disappointing news from the comptroller. So I'm not counting on anything until we get the official update,” said House Speaker Joe Straus, R-San Antonio. “But the economy does continue to expand, and that's a good thing.”

Claims include an estimated $4.7 billion in Medicaid expenses due this year that aren't accounted for in the budget.

In addition, some leaders want to quickly undo an accounting maneuver used to balance the current budget, in which they delayed a $2 billion payment to schools.

Looking ahead to the next budget cycle, lawmakers will have to cope with the growing expense of programs like Medicaid. It's estimated Medicaid will take $7.8 billion more in 2014-15 than was allocated last year.

At the same time, the push to restore education cuts, coming against the backdrop of a school funding lawsuit, is fierce in light of the improving economic picture. Public education got $5.4 billion less in state money than it would have received under previous funding formulas.

“We're going to need to fund enrollment growth” in public schools in the next two-year period, at about $2 billion, Straus said.

However, any additional investment may be complicated by a lawsuit over school funding, since lawmakers who have faced repeated litigation like to wait for cases to work their way up to a Texas Supreme Court ruling, so they can see what they are required to do.

Sen. Leticia Van de Putte, D-San Antonio, said spending decisions could be affected by parental outrage: “I think we have a lot of what I call mad mommies.”

“We didn't have to cut education,” said Rep. Mike Villarreal, D-San Antonio. “We ended up having nearly twice the amount of money needed to cover the cuts in education. ... It's heartbreaking.”

Villarreal said he would particularly like to see “strategic investments” to restore money to areas including pre-kindergarten and college grants.

Lawmakers also are facing a push to addresswater and transportation problems.

“In Texas, the question for us is, do we want to remain economically competitive? Our competitors are beating us up on water and roads right now,'” said Bill Hammond, president of the Texas Association of Business.

His association favors a $50 increase in the motor vehicle registration fee to fund road projects. Williams said a registration fee makes sense, but he's unsure of the legislative appetite.

Lt. Gov. David Dewhurst has floated the idea of taking $1 billion from the rainy day fund to create an infrastructure bank to help fund water projects.

Lawmakers won't get to the level of general revenue spending needed to get back to the service level before last year's big cuts.

The Center for Public Policy Priorities, which advocates for programs for lower-income Texans, estimates it would take $108 billion in general revenue money to get back to the current services spending level of two years ago.

The current general revenue budget is $81.3 million, before adding back money for the unfunded Medicaid or other expenses.

“What we are going to be doing in this session is looking at the very serious cuts we made last session and picking a few areas where we'll make some restorations, at best, and they'd have to be modest,” said McCown, who advocates revamping the tax system to bring in revenue for key services to a growing population.

Some say the state should continue to bear down fiscally.

“We are just preparing for another really tight budget session. ... We just believe the legislature should still continue to look for ways to cut back where they can,” said Talmadge Heflin, a former House Appropriations chairman with the limited government Texas Public Policy Foundation. Sen. Judith Zaffirini, D-Laredo, said additional revenue would be needed to restore cuts and address issues like billions of dollars worth of fees that were collected for one purpose but instead are used to help balance the budget, a priority for Straus.

Asked if there's any reason to think Gov. Rick Perry would change his anti-tax-increase stand on new revenue, which has stymied some money ideas in the past, Zaffirini said, “No, but I can pray.”